Meta

Everyone has been assuming that tying MPs pay increases to the average for the public sector will see them fall. I was assuming that. So I went to the Stats NZ QES survey to work out how much less pay MPs would have got over the last six years, if this new law had been in force the whole time.

To my surprise I found that the public sector have had larger (%) pay increases than MPs have!

If backdated, this law change would have seen MPs get even larger pay increases.

I’ve gone back through the QES surveys since 2009 and calculated the average public sector increase in ordinary time earnings for each year. This is the column called “New Law”. It is used by comparing the average for the four quarters to June with the average for the four quarters the year prior.

The right hand column is what the total package increase was by the Remuneration Authority under the existing law. The actual salary increases are sometimes more than this, but that is because of the decreased value of some personal benefits. That package approach continues under the new law – so this is comparing like with like.

So over the last six years the Remuneration Authority has only increased MPs packages by an average of 1.7% a year.

The average increase in the public sector, according to QES, is 3.1% a year.

So while this law change will reduce the MPs pay increase for this year, it could well result in them gaining larger increases over the long term than they would have under the current law.

The Remuneration Authority has in fact been very restrained in the last six years.

There is some benefit to the new law. It is a clear formula, that people can relate to – MPs get the same as public servants. However the history of the last six years is that this could well mean MPs end up with larger pay rises. Now I don’t have a problem with this, but I’m not sure this is what people realise the impact of the law may be.

I think it was the wrong call to restrict MPs salary increase to the overall public sector, rather than to similar positions. The salary of the Prime Minister should not be determined based on what the going rate for policy analysts is.

I was interested in what the relativity has been over the years between the salaries set for MPs, and the salaries set for judges, as both are set by the Remuneration Authority. Have MPs had bigger increases than judges? The same? fallen away?

I headed down to the National Library to dig out determinations from 1985 onwards, and the data is below.

This compares the salaries set for backbench MPs with District Court Judges. An MP used to get 73% of what a District Court Judge gets, but today they get just 48%. That is excluding superannuation subsidies which are far more generous to judges.

Then I compared Cabinet Ministers to High Court Judges. In 1985 they were paid almost the same (Ministers got $957 more). Today a Cabinet Minister gets just 67% of what a High Court Judge gets. They get paid almost $150,000 less.

Finally we have the Prime Minister and the Chief Justice. The PM today gets 90% of what the Chief Justice gets, but in 1985 he got paid a third more than the Chief Justice.

So as unpopular as it is with many, MPs salaries have actually fallen away compared to similar positions in the past.

Prime Minister John Key today announced an overhaul of the Remuneration Authority Act, tying MP salaries to those of the wider public sector, which will be passed under urgency.

Mr Key says the decision was made after the Remuneration Authority’s latest determination which saw the total remuneration received by MPs increased by about 3.5 per cent.

“That increase was neither necessary nor justified at a time when inflation is at 0.8 per cent,” says Mr Key.

“While the decision was made independently of MPs, they should not be receiving increases which are disproportionate to the wider public sector.”

Mr Key says the Remuneration Authority referred specifically to the criteria contained in the Remuneration Authority Act 1977 as the reason for the increases, therefore a law change was necessary.

The change will take away the Authority’s discretion when setting MP pay. The sole criteria will now be the average public sector pay increase for the previous year.

As I have blogged previously I’m against annual backdated pay increases for MPs. The latest increase was not justified.

However while it is good to see the Government moving to make changes, this is not necessarily the best alternative to the status quo. It could create a perverse incentive for future governments to agree to high levels of public sector pay rises, so that they get the same increase.

Ministers anticipate more detailed advice from officials on the measure to be used, which will be set out in the legislation, likely to be introduced in the next sitting session.

The press release doesn’t mention urgency, but journalists are reporting it will be passed under urgency. If this is the case, I’m against that happening. Urgency should be for laws that need to be amended urgently because of a loophole. Not for turning down embarrassing pay increases.

At a minimum the proposed new law should go to a select committee for public submissions. Even though the law is reducing the level of future pay increases for MPs, it should not be decided by them, with no public input.

So it is good to see the Government taking action, but it would be good to make sure we have time to consider if it is the best alternative to the status quo.

UPDATE: Actually the press release does mention it is being passed under urgency – at the very beginning. I missed it.

In 2014, the Authority’s payline at the level for ordinary members increased by 3.3%. For this year, the personal benefit of the travel entitlement to members and their families has been assessed at $3,200 per member, a reduction in the amount assessed in previous years, which takes into account tightened provisions around the personal use of travel by family members. Taking into account the change in value of the travel entitlement, this produces a package increase of 3.56% and a salary increase for ordinary members of 5.5%.

So a 3.6% increase. All pay rises for MPs are unpopular but with inflation at below 1% this one will be more so.

The MPs only have themselves to blame though. On multiple occasions I have submitted that the law should be changed so that the Remuneration Authority sets salaries for an entire parliamentary term, rather than annually. There is no need for annual adjustments in a low inflation environment. They should be set three months before each election and apply for the whole term.

Maybe the backlash to this increase, will finally see a change. I don’t begrudge MPs getting well remunerated for what can be very tough roles. But they go through a needless annual round of pain and vitriol by having annual increases.

This shows the new salaries for each type of MP, and the increase in total salaries which is $1.22 million more.

Of interest is the Labour Deputy Leader and Senior Whip get paid more than the Green and NZ First party leaders.

A committee of MPs has recommended tougher financial penalties for themselves and their colleagues when they are away from Parliament without leave.

But MPs on the Government Administration Committee say decisions about MPs’ travel perks should remain with Parliament’s Speaker while the Remuneration Authority should decide on the level of their accommodation allowances.

The Government’s Members of Parliament (Remuneration and Services) Bill – drafted in response to the regular public anger over MPs’ remuneration – lifted the penalty for MPs absent without leave for more than nine days each year to about $270 a day from the current $10.

However, the committee has recommended that the penalty kicks in after just three days and is effectively increased by setting it at 0.2 per cent of the individual MP’s gross salary.

That works out to $289 a day for a backbench MP, $525 a day for Crown Ministers and the leader of the Opposition and $838 a day for the Prime Minister.

That is much better.

While the Prime Minister, other ministers and MPs are frequently away from Parliament on sitting days, they generally have a leave of absence. New rules setting out the criteria under which MPs are deemed to be absent without leave will be formulated by parties in consultation with the Speaker.

Hone may not end up getting paid much! He’s almost never there.

I’m disappointed however that the committee did not take up (or even mention) my proposal that MPs remuneration should only be reviewed every three years, with any changes to take place after an election. This would have avoided the public backlash around MPs getting pay rises, as no MP would get a pay rise during their term of Parliament. So when they get a backlash at the next pay increase, well they’ll have no one but themselves to blame.

Travel perks for former MPs will now be protected in law under legislation debated by Parliament yesterday but the amount spent by each individual former MP will be revealed annually.

The Members of Parliament (Remuneration and Services) Bill costs taxpayers about $1.3 million a year.

Former MPs elected before 1999 and their spouses and widows and widowers are entitled to rebates on domestic and international airfares.

I would’t say the bill will cost taxpayers anything. The existing entitlements are what cost the taxpayers.

Incidentally only 23 of the 121 current MPs will enjoy travel perks when they retire.

The bill shifts responsibility for travel and accommodation of MPs and ministers away from the Speaker and Prime Minister to the Remuneration Authority plus an additional person with knowledge in the area.

This is the key change, and very welcome. Under the joint leadership of John Key and Lockwood Smith there has been both a unprecedented level of transparency with travel expenses released every quarter and every single item on ministerial credit cards released. Key has also reduced some of the Ministerial entitlements such as spousal travel overseas.

The bill also sets in law a requirement by MPs to disclose their travel and accommodation costs quarterly, a practice instigated on a voluntary basis by Speaker Lockwood Smith.

And the bill contains what is known as the “Chris Carter clause” after the ex-Labour MP who went awol after his expulsion from caucus: it increases the penalty for being absent from Parliament without good cause from its present $10 a day to $270 a day.

Travel, accommodation, attendance and communications services for members of Parliament and members of the Executive should be determined by an independent body – an enhanced Remuneration Authority which includes a former MP and a person with appropriate skills and
experience in the administration of Parliament

The RA should also determine entitlements to funding and services to support parties’ and members’ parliamentary operations

The Official Information Act 1982 should be extended to cover information held
by the Speaker in his role with ministerial responsibilities for Parliamentary
Service and the Office of the Clerk; the Parliamentary Service; the Parliamentary
Service Commission; and the Office of the Clerk in its departmental holdings

The OIA should not apply to information held by members in their capacity as members of Parliament, information relating to the development of parliamentary party policies, and party organisational material, including media advice and polling information.

Unauthorised absences of greater than nine days should result in 0.2% of annual salary being deducted a day. That is around $250 a day, up from $10.

Overall this looks very good. I’ve long supported the OIA applying to the financial aspects of Parliamentary Service, but have not supported full inclusion, where someone like me (for example) could send in an OIA asking for all e-mails between Phil Goff and his press secretaries. No parliamentary party could operate with its internal e-mails being made available to the media and other parties.

So I think the Law Commission have done a good job on the OIA side, as their proposals hopefully stand a good chance of being adopted.

The handing over of perks, expenses and parliamentary party funding to an independent body is also an idea whose time has come. Having a former MP and someone with parliamentary administration experience on the Remuneration Authority should mean that its decisions will be made on practical experience, not textbook theory.

I hope the Government, and indeed all parties, support the report. There may be some fine-tuning to be done, but the principles look good to me.

UPDATE: Yay the PM has just announced that the Government has accepted in principle the recommendation to have MPs and Ministers expenses set by an independent body. By the end of this term of Parliament, things will be hugely more transparent and accountable compared to 2008 and before.

An increase to MPs’ salaries is almost inevitable if the Prime Minister’s bid to get rid of their foreign-travel perks is successful.

It is. As people now all know (and something I was the first to highlight over a year ago as it was obscurely buried in the Remuneration Authority’s 2003 determination, and had not been explicitly listed since) the value of the perk (as calculated by IRD) is deducted from their salary effectively.

If the Speaker just abolished it unilaterally, then MPs would have their base salary increase by $9,500 by the Remuneration Authority.

Although the demise of the perk seems certain, the taxpayer is likely to have to make up for it by an increase in MPs’ salaries.

Mr Key said he expected any rise to be “very modest” and putting salaries up by the full $9800 value of the perk was “unacceptable to me”. A significant increase would only expose MPs to more criticism, even though they had no say in their pay, he said.

Mr Key has urged the Speaker to ask the Remuneration Authority to decide how to abolish the perk and whether changes should be made to salaries as a result.

This is where the PM has been quite cunning. He is basically asking the Remuneration Authority to say in advance how much they would increase salaries, if the perk is abolished – with a rather unsubtle note that an increase to the full value is “unacceptable”.

So the Remuneration Authority now has to decide what to do, which is challenging as the most logical would just be to stop deducting the $9,800 from the base salary.

Here’s what I would do. Divide $433,000 by 120 MPs and that is $3,500 per MP. Add that to the base salary and you can claim the exercise is revenue neutral. It’s not the principled way to do it (that would be the $9,800 option) but it is a pragmatic solution.

Labour leader Phil Goff agreed with Mr Key’s request for the perk to be reviewed independently, but said it was essential to retain some entitlement to international travel to allow MPs to go overseas on parliamentary business.

He had used his rebate for his recent trip to Australia to meet Prime Minister Julia Gillard and senior Cabinet ministers. “That enables me to do my job properly and is a legitimate use. Trying to justify the use of it for holidays will never be regarded by the public as a legitimate use.” …

Act leader Rodney Hide said he agreed with the Prime Minister that the perk should go and although it was for the Remuneration Authority to decide on salary increases in lieu of the perk, “you’d hope they’d be a wee bit judicious”.

He disputed Mr Goff’s call for some provision for work travel, saying there was already enough discretionary funding for it in party leaders’ budgets – a bulk sum they get to run their offices.

I’m actually more in agreement with Phil Goff on this point. I do think MPs should be able to travel internationally when it is work related. Many of the best policy ideas come from initiatives in other countries etc.

Now Rodney is right that such travel can be funded from the leader’s office budget. And that is where it should be funded from – rather than a separate dedicated fund. If you have a fund for travel – then people will make sure it gets fully used. If it comes from the bulk fund, then the leader (or their COS) has to decide whether the value of that travel is greater than the value they would get from spending it on more staff, or policy research, or a pamphlet etc etc.

But what I think Goff wants, and I agree with him, is a review of the level of funding for the Leader’s Office to ensure it is adequate to be able to fund legitimate work related international travel by MPs, now they can not use the perk to fund it.

MPs across the political spectrum are calling for their private travel perks to be scrapped after the resignation of Cabinet minister Pansy Wong.

Prime Minister John Key said yesterday there was “a time and a place” for looking at the travel perks.

Speaking from Japan, where he was attending the Apec summit, he said: “It’s possible there may need to be some change but today’s not the day to make those comments.

“It’s tripped up a number of MPs and that’s very unfortunate. It looks somewhat like a relic of the past but in the end that’s not solely my decision. That’s something we need to discuss [and] in due course we will.”

Raising MPs’ salary in place of the perks was contentious.

“It’s not so much getting rid of it, the question is would there be any salary adjustment.”

That sounds like a move towards scrapping it.

The issue though, is that it will mean an increase in the salaries for MPs, as the Remuneration Authority currently deducts it from the level at which it judges their remuneration should be, to set base salary.

This increase would basically be automatic – it would not be requested by MPs. You would probably have to change the law, to stop there being an increase if the travel perk is removed.

But that is what should happen. The international travel perk should go, as I have blogged previously. And MPs should get paid what the RA determines is appropriate.

Finance Minister Bill English qualified for a $700-a-week rent payment from taxpayers after signing a declaration that he had no financial interest in the trust which owned his family home.

It has been revealed that officials took concerns to the prime minister’s office about whether Mr English qualified for the payment, which is double the amount he was entitled to as an ordinary MP.

But documents issued under the Official Information Act show they were told it would be okay as long as Mr English certified that he had no financial interest in the Endeavour Trust, which owns his $1.2 million Karori property.

My understanding is that Bill English is a trustee of the Endeavour Trust, but he is not a beneficiary.

The situation with trusts and parliamentary accommodation is not unique to English. Most Green Party MPs live in houses owned by their superannuation fund. This mean they can claim the full rental amount, rather than merely interest on the mortgage.

Having changed the Ministerial rules, I wonder if the parliamentary rules will also be reviewed.

Prime Minister John Key expects other high-earners paid from the public purse to follow MPs and the Governor-General by asking not to get a pay rise this year.

Parliament yesterday unanimously agreed to ask the Remuneration Authority not to lift MPs’ wages when they are reviewed in the middle of this year.

The Remuneration Authority is responsible for setting the salaries of MPs, judges, local body councillors and public sector bosses.

“I’m sure judges and the like will take a similar view and I’m sure the Remuneration Authority, in reaching their conclusion, will take into consideration that this is a time of restraint and it’s important that we, as well-paid New Zealanders, show leadership,” said Mr Key

Good God, this is about as subtle as firing a flare gun through the door of the court. The PM is basically telling Judges to suck it up and also ask for a nil pay rise.

John has to be careful here. Trying to pressure Judges into a nil pay rise, isn’t that far removed from trying to pressure them into a pay cut. And in real terms, a nil increase is a pay cut. The motives are good, but perhaps the Attorney-General could point out to the Prime Minister that rather useful piece of law known as The Constitution Act 1986:

24 Salaries of Judges not to be reduced

The salary of a Judge of the High Court shall not be reduced during the continuance of the Judge’s commission.

Prime Minister John Key has urged the Remuneration Authority to freeze MPs’ pay at its next review due to the tough economic times.

Mr Key today said he had also written to the Remuneration Authority asking it to exercise restraint when considering all salary rises in its jurisdiction.

The authority, which is independent and free to ignore Mr Key, determines pay rises for MPs, the judiciary and specified statutory officers and members of local authorities and community boards.

We won’t know until late 2009 if they take heed, but I think they will.

Mr Key said it was still a case of the Government leading by example.

“The New Zealand economy is facing what looks to be a difficult time ahead,” he said.

“It is only right that in these changing economic times, as ordinary New Zealanders tighten their belts, MPs and ministers also play their part.

“While the Remuneration Authority is an independent body I would hope that it recognises the current economic climate calls for a cautious use of taxpayer money.”

Mr Key said the National Party would also file a submission with the authority calling for a zero pay increase in parliamentary salaries.

As I have said many times before, I think the law should be changed so MPs salaries never change during their term of office. The Remuneration Authority should set pay rates for an entire three year term, a few months before each scheduled election.

The Remuneration Authority today announced the new pay scales for MPs. These of course are as popular as pork chops as a synagogue.

I’ve said for years on end that Parliament should amend the Remuneration Authority Act so that MPs only get pay adjusted once every three years – just before an election. In other words the pay is set for each term of Parliament, and you get elected to a role knowing what it will be. With relatively low inflation, there is no need for annual increases. Instead of getting flak every year for a 5% rise, just have a triennial 15% (or so) increase that will only apply to the next Parliament.

Every year the Remuneration Board, an independent body, reviews the pay of MPs. Whatever pay increase it recommends is always approved by Parliament unanimously and without debate, to keep the process from being politicised. Every year, our ever mature media gleefully portrays this process as politicians giving themselves a huge pay rise.

What if, instead, MPs pay increases were automatic and the same amount as the median income increase? The pay and annual increase methodology would be contained in legislation, so would not require annual approval. Any suggestion of impropriety would be eliminated and our journalists could get on with investigating real stories.

First of all a couple of minor corrections. It is the Remuneration Authority, not Board, and more importantly they do not recommend pay increases – they set salaries. Not only does Parliament not get to vote on them, they don’t even need an Order-in-Council.

I agree it would be good to avoid the annual outrage over MPs getting a payrise, which people think they have voted themselves. But linking to the median wage would over time have MPs salaries drift below the level they should be to attract suitable professionals. It would also provide an incentive for MPs to let inflation run rampant as wage increases of 15% and inflation of 15% hurts people on the median wage, but actually benefits people on higher incomes.

I do recall a Yes Prime Minister episode where Sir Humphrey gets a massive pay rise through Cabinet for the public service, by having MPs pay rises linked to public servants!

What I have long advocated is that MPs salaries and allowances should only be reviewed and set every three years, instead of annually. Inflation is low enough that this can be done.

What this would mean if no MP gets a pay increase during a term of Parliament. They keep the same salary for their term of office. So in 2008 the RA would set MP salaries for 2009 – 2011. And in 2011 for 2012 – 2014. They would only take effect for the new Parliament. So candidates can choose to stand knowing exactly what the salary will be, and voters will know the salary for the job they are electing people to.

Pablo, in the comments of The Standard, also endorses this and notes this is constitutional law in the US.

It would be a popular policy with the public, to have no pay increases for MPs during a parliamentary term, and it would save the MPs the annual bashing they get for something they don’t decide.